CHENNAI: The Deepavali bonanza of reducing Performance Security from existing 5-10 per cent to 3 per cent of the value of the contract for all existing contracts by the Union Finance Ministry has failed to enthuse contractors in the State. They feel the implementation part lies with officials of public sector units as well as State entities.
As per the notification, following representations from commercial entities and contractors, the decision was taken to reduce performance security. As per Rule 171 of General Financial Rules 2017, performance security is to be obtained from successful bidder awarded the contract for an amount of 5 to 10 per cent of the value of the contract.
Now, on account of slowdown in economy owing to the pandemic and acute financial crunch, which, in turn, are affecting timely execution, the notification was passed.
But, contractors are cautious in reacting to the package. They say that just after the pandemic such announcements were made by the Finance Ministry, but the officials have turned a deaf ear to such notifications.
J Joseph Charles, proprietor of Blesso Constructions, says the Ministry should ensure the announcements are implemented on the ground. "When the first announcement during the pandemic was made on returning the bank guarantee as per the value of work done, I wrote to Power Grid Corporation of India for whom I had taken up a project in Trichur. But, they refused to heed to my request," says Joseph.
Power Grid Corporation refused to pay performance guarantee and also deducted liquidity damages, Joseph adds. Public sector units talk about the Defect Liability Period Clause in the contract rather than the Finance Ministry notification.
Railway contractor and State secretary of the Builders Association of India, K Venkatesan, says contractors are facing liquidity crisis. "Fifty per cent of our funds are stuck in the government projects and we are awaiting payments,' he says.
"Prior to the pandemic, the Centre used to payback bank guarantees and also release our funds within a month. Now, it takes over six months," he says adding that many of the contractors are struggling with 50 per cent of funds.
The announcement of the Finance Ministry, he says, is a good move, but one has to ensure whether these announcements are implemented by the officials of PSUs, State and other entities.
He says that many government agencies wanted many infrastructure projects to slow down as they are facing problems in payment. The pandemic may have a huge impact on small contractors who are facing a liquidity crunch and they may find it difficult.